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1:10pm (EST)
We wanted to bring Apollo Group (APOL, $44.29, down $1.68) to your attention again today as shares have hit another 52-week low. We have been bearish on this stock for a couple years, and we had good success in the past playing options on it.
Apollo Group and other Educational stocks are taking a beating today after a “gainful employment probe” continues to hit the industry. The last time out, we took a small loss on an option trade because of the volatility, but it was a sign of things to come.
From May 27th:
“We took a 16% hit on Apollo after the parameters of the trade were broken, but we have been warning our subscribers to stay away from this dog for years. Justice might not have been served on our recommended option trade, but the 52-week low of $52.20 looks like it will fall today.
We didn’t like the volatility when shares shot up to $60 last Thursday on some bogus rumor so we got our subscribers out. However, we should have listened to our gut as the stock looks poised to fall below $50 today.” (END)
From January 8th:
“Apollo actually made a slight gain yesterday and reported their earnings after the bell last night. Although they painted a pretty picture for Wall Street, the stock was down $3.20, to $60.74, in after-hours trading last night.
The company reported earnings that beat estimates by a penny but once again, the way they run their accounting department has raised some concerns. We made 4 trade recommendations on Apollo last year, all put options, and the returns were 100%, -15%, 50%, and -17%.” (END)
The point we are trying to make is that when you follow a terrible company for years you can get a feel for how it trades and we plan on teaching you this. (Our Momentum Options Trading Manual is coming in July, we promise). The same is true for companies that have solid businesses. You buy call options on stocks that you feel are going to go up and put options on stocks that you think are going to sink. It’s that simple. The risks are greater playing options but the returns can be incredible.
We profiled Apollo Group again on our Watch List last week because we knew the fall was coming but sometimes our portfolio is full so we miss out on a few trades. We don’t like to carry over 10 open positions at once and sometimes WE will miss trades because we don’t like to break our own rules. However, our Watch List has been hot and a lot of traders are writing to thank us for adding it.
We wrote a really good story on Apollo Group when the stock was at $73 back in October 2009. We could have bought a LEAP put option but the premiums on going 9-12 months out can be pretty expensive. Here is that article and it provides a more detailed look at the company’s shady business practices (If you like playing poker, you will love our analogies):
http://momentumoptionstrading.com/2009/10/28/apollo-group-has-a-skeleton-or-two/
We have a lot to talk about in our MEMBERS AREA today, and for those of you who are thinking of joining us, you have picked a great time. Not only are we nearly set to launch our trading manual, we also have plans to offer AUTO-TRADING by mid-July!
We are still hammering out the details, but we think we have found a great firm to handle your trades. We know many of you are busy, and the requests for auto-trading have not gone unheard. Both will be available soon so stay tuned!
As we head to press, the Dow is down 31 points t 10,121 while the S&P 500 is down by 2 points and was last seen at 1,071. The Nasdaq is higher by 3 points to 2,220. We will be back Sunday night with the Weekly Wrap. Oh, by the way, BP (BP, $27.31, down $1.43) is at 14-year lows. Next week is setting up to be a doozy, folks…
Apollo Group (APOL) Admits Wrongdoing
Thursday, August 5th, 2010
1:05pm (EST)
We finally got a confession.
After years of whistle-blowing, countless articles, and a few options trades here and there, Apollo Group (APOL, $43.04, down $1.72) finally came clean to us and Wall Street that it doesn’t run a tight ship. We have been on this story for a few years and have been telling you something is fishy with the Educational stocks, especially Apollo, and the cat is out the bag.
The United States Government Accountability Office (GAO) held a show-and-tell meeting for the boys on the Hill about the deceptive recruiting practices at many of the “for-profit” colleges and named names.
Congress is trying to pass new legislation to curb these practices by the end of the year or early 2011. Here were some of our thoughts from our Editor-in-Chief on March 6th, 2009 (quotes from that day):
(START) “Obama’s budget means that most of the nation’s nearly $90 billion in student lending will run through the direct-loan program run by the U.S. Education Department. Stocks of “non-profit” and “for-profit” education providers slipped on the news. Many of these stocks have fallen dramatically since the news but some have held up better than others.
For instance, Sallie Mae (SLM, $3.38, down $0.60) which is a “non-profit” entity has dropped over 50% in less than two weeks, falling from a high of $8.89 to nearly $3. The one stock I am targeting is Apollo Group (APOL, $66.79, up $0.28) which is a “for-profit” business and runs numerous educational programs and services at high school, college, and graduate levels. Perhaps you have heard of The University of Phoenix, Inc.?
What has been interesting with Apollo’s stock is that it held up pretty well until yesterday when shares broke below $70. That is when my “Watch List” alerted me of the stock. I’m not sure if the “for-profit” stocks are supposed to benefit from the package at the expense of the “non-profit” businesses but what really got me interested in shorting Apollo were the shady business practices and lawsuits I have been reading about. Type in “Apollo Group Lawsuits” in a search engine and you will find some interesting stories.
Student lenders were embarrassed by a scandal in 2007 that revealed some had given money and gifts to college financial aid officers to A-B-C (Always Be Closing…) business and these stocks were punished back then. As for Apollo, there are allegations of misconduct and “Boiler Room” practices which are locked up in lawsuits.
In fact, there was a lawsuit that was re-filed back in January that portrays this unmistakable boiler room work environment. The former employee claims that he was harassed because he would not commit “unlawful acts” in recruiting students. The suit also confirms that his salary was based on enrollment goals. Apollo Group has said they do not pay their enrollment counselors incentive compensation for performance.
What is really a red flag is the amount of insider selling that Apollo’s management has dumped over the past 3 years. Sales are in the hundreds of millions of dollars while at the same time, the company continues to delay the inevitable court cases that are on its agenda. This could get messy.
The U.S. Education Department is set to assess the value of $2.5 billion of government guaranteed student loans being funneled through Apollo and that could also get interesting. Given the current crackdown environment that the government has bestowed on Wall Street, this could really get interesting if some of the company’s officers are found guilty of engaging in unethical practices.
I could go on and on but after doing some chart work, I’m convinced that Apollo Group could be headed for a major sell-off. The stock recently broke through its 100-day moving average and is poised to bust below its 200-day. Where there is smoke, there is usually fire and I’m getting that feeling with Apollo.” (END)
Sometimes you just know a rat when you see one.
As far as the market today, the bears have held the bulls at bay, but the losses have been contained although the S&P 500 and Nasdaq have slipped back below key technical levels.
As we head to press, the Dow is lower by 37 points to 10,643 and has touched a low of 10,612. The S&P is off by 5 points and is at 1,122 while the Nasdaq is down 13 points to 2,290. The S&P has slipped below 1,125 and the Nasdaq has dipped below 2,300 which are the levels the bulls want to hold as they try to push 1,150 and 2,350, respectively.
Tomorrow is supposed to be a “big day” as Wall Street braces for the unemployment numbers. We say that lightly because it may end up being a non-event. We think there is a chance the unemployment rate comes in at 9.6% which is slightly higher than the current 9.5% rate and we will know before the market opens how traders take the news.
Be sure to check back with us at 9am, Friday morning, for the latest and greatest.
We have updated our Members Area and our Watch List is showing a lot of movement. We are this close to pulling the trigger on a new trade.
Tags: APOL, Apollo Group, call options, how to trade options, momentum options trading, Momentum stocks, option picks, option stock picks, options alerts, options newsletter, options track record, put options, stock options trading, volatile options
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